3 best video game stocks to buy in June
Interactive entertainment is the fastest growing entertainment category in the world, reaching $ 177 billion in total revenue in 2020. Advances in graphics technology and the adoption of mobile devices make video games more immersive and accessible, which should continue to drive the industry forward.
Three video game stocks that I would buy today are Take-Two Interactive (NASDAQ: TTWO), Corsair game (NASDAQ: CRSR), and Sony (NYSE: SONY). Here’s why these stocks should offer good returns for investors.
1. Take-Two: a growing game producer
Take-Two is the company behind the popular Grand Theft Auto franchise, one of the best-selling titles of all time with over 270 million copies sold. The torchbearer of the series is currently Grand Theft Auto V (GTA V), which sold 145 million copies. In the last quarter, GTA V and good results from NBA 2K continued to deliver strong results, helping Take-Two achieve a record year of reservations (a non-GAAP revenue measure).
As management expects total bookings to decline this year, CEO Strauss Zelnick said on the recent earnings conference call that they expected the addressable market opportunity to be “significantly more. greater in the future than it was before the pandemic “.
To capitalize on, Take-Two has several new titles in development, which management expects to produce record levels of bookings over the next few years. PGA 2K21 Tour launched last year and has sold over 2 million copies. In the fiscal fourth quarter, Take-Two acquired the creator of PGA Tour, HB Studios, testifying to management’s satisfaction with the stock’s results so far and the willingness to invest more in its development to drive the growth of future installments.
The stock hit a high of $ 214 in January before retreating in recent months. The stock price rebounded from the recent earnings report and currently stands at $ 185 at the time of writing, a price / free cash flow (P / FCF) multiple of 25. This valuation seems reasonable compared to the long term of the companies. growth prospects over time, making Take-Two one of the top game producers to consider buying now.
2. Corsair Gaming: a leading brand of gaming accessories
Corsair Gaming is a leading brand of computer peripherals and system components primarily designed for gamers. The momentum of the pandemic continued into the first quarter, with revenue rising 71% year-over-year. With the stock falling 12% year-to-date, this could be a great time to consider buying stocks before better news pushes the stock price higher.
Management continues to introduce new products, which is a good sign that the company sees healthy demand continuing in the near term. It released about two products per week in the first quarter and plans to maintain a steady pace of new releases throughout the year.
A savvy investor might think that this strategy could backfire if demand suddenly drops as a result of soaring sales during the pandemic. However, Corsair is struggling to meet demand due to supply shortages. The increase in the number of products on store shelves allows Corsair to gain market share once supply and logistics constraints ease.
Investors still underestimate Corsair Gaming. Based on better short-term demand prospects, management has raised its guidance for the full year and now expects revenue to be between $ 1.9 billion and $ 2 billion. , $ 1 billion, or year-on-year growth of 11.6% to 23.4%. This outlook makes the stock a compelling buy at its current P / FCF multiple of 16.8.
3. Sony: Strong demand for the PlayStation 5
Sony’s gaming business was on fire last year. Sony reported a 9% increase in total revenue, with most of that increase coming from the gaming and network services business.
Demand for the new PlayStation 5 (PS5) game console has been incredibly strong, but Sony is struggling to keep up with the demand given the supply chain issues that are currently plaguing many companies. It sold 7.8 million units in fiscal 2020 (which ended in March) and management expects the PS5 to become its greatest gaming platform of all time. .
Sony is currently in the process of upgrading PS4 owners. Supply issues have slowed this process down, but the great interest in the PS5 bodes well for future growth, especially for PlayStation Plus subscriptions and the PlayStation Now cloud gaming service. It is these categories, along with sales of software titles, that drive Sony’s gaming profits.
Sony has made significant strides in recent years to shift its gaming business to higher margin software and services, instead of relying on low margin hardware sales. PlayStation Plus subscribers have more than doubled to 47.6 million in the past five years.
The electronics giant is involved in many different business segments, including music, images, imaging solutions and financial services. But growth opportunities in games and music, which together make up the bulk of Sony’s total operating profit, make the stock worth holding at a modest P / FCF multiple of 15.6. .
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.